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tv   Bloomberg Markets European Open  Bloomberg  January 25, 2018 2:30am-4:00am EST

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guy: good morning and welcome. this is the european open. i am guide johnson in our new london headquarters alongside matt miller. open less than 30 minutes away. ♪ guy: good morning. how dovish does draghi have to be to slow the euro's rapid rise? the ecb decision is at 1:45 p.m. in frankfurt. the press conference is 45 minutes later. we will take you live. lula loses. unlikely to be on the ballot in
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october after an appeals court upheld his corruption investigation. markets will have a strong a. pressure will hurt full-year sales by 460 million pounds. we will speak to the company's ceo in an hours time. davos withre live in a great line up of interviews. let's find out who is on deck. good morning. francine: good morning. we have quite a lot with a great line up of interviews. let's find out who is on deck. of great interviews coming up. be speaking to the barclays ceo jes staley. to the primelking minister of ireland and we will be talking to the u.k. prime minister as well as well as the chancellor. if you look at the -- we are spending politics, the economy, and finance and we are seeing the ukrainian president.
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it is a packed show and it is day three of the world economic forum. we have all of today and tomorrow. talk about the markets. what do we have in terms of what the futures are expecting? less than half an hour till the start of trading. what is the picture? matt: we see futures down across the board. if you take a look at what is going on in european futures, we see losses on ftse futures as well as on dexia cheerswhat do t the futures are expecting? less than half an hour till the start -- dax futures. cac futures look unchanged, but we will see how they adjust. take a look at treasuries. i have a three-day chart of treasuries. we can see the yield is coming down on the third day of trading. 2.6 percentup to yesterday but coming down could be a dead cat bounce. it could be the markets are
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expecting up purchase of treasuries, a shift from equity funds as they re-way near the end of the month. that rebalancing will have to have been quickly. it will be interesting to see how that feeds back into the markets. it could be negative for the equities and positive for bond markets. that selloff could positive the next few sessions. the ftse being battered as the pound went through. backed off a little bit against the greenback. the japanese markets and the eurostoxx. we await the ecb decision. it will be fascinating to see what they have to say about the rise of the single currency. the kiwi dollar is rising, the swiss franc is rising, as you can see. the canadian dollar, the dollar continued goes down. mr. mnuchin changed the game in some people's mind just today. let's show you what is happening
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with commodities. there is a dollars theme running through this. big, oilbid, wheat bid, the brent and of uti contracts. there is a bunch of stories that are being affected by what is happening with the dollar move but we are awaiting mario draghi, 1:45 p.m. in frankfurt. that will be the decision made by the ecb. a big one for global markets. let's talk about spain. fitch upgraded the sovereign debt rating. catalan impact is limited. the first time spain has been in a territory since 2012. ands get back out to davos francine lacqua. francine: we are joined by the ceo of bbba. will get more about the
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political situation. you are a little bit of a trailblazer when it comes to semtech. do you think investors are not foray intoperly your thin tech -- fintech? 50% of our customers will be digital and that shows in things like profitability. 30 times more or than nondigital customers. they are more satisfied than other customers but it takes a while for that to trickle through the p&l. we had a great year in terms of growth, core revenue growth for the third quarter, we have not published the full year yet. grew by0% when expenses 1.2%. we are starting to see a bit of
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that, cost savings, we will see more of that. we were selling digitally one out of 10 products two years ago, today it is one out of three and that is growing exponentially. it has to trickle down and has to be included in the share price. francine: is there anything else you can do to convince the market? guest: the market will have to see one results come through. it is a story we tell right now and we have to consider that and appreciate it. we are seeing a tremendous result and it will come through eventually. banking, it is a long book it has a long tenure, things take a while to change. of results are a result positions of years before. that is why it takes a while. francine: what you ever use bitcoin in one of your quest -- products? blockchain definitely.
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it has an impact in what we do not just in terms of payments but in terms of changing the nature of the authorities that provide trust which are very important in financial intermediation. very a highly risky asset, unpredictable not just because of the short-term volatility, but even longer-term, one of the things it consolidates is value because of its scarcity. that if you invest in bitcoin it has to be money that you can afford to lose because it is highly risky. francine: do you worry about [indiscernible] -- well thatt jeopardize your customers' data? guest: we view it as an opportunity to serve our customers better. the core of our strategy in terms of digital transformation is not in the channels i comment
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on but it is about providing better solutions to customers, helping them in their life or business. make better decisions, leveraging data and also with machine learning, ai, technology. it gives us access to more data so we can do that job better, helping them make the right decisions for their life, their business based on who they are and their goals in life. francine: is that what other banks are doing? banks are focused on infrastructure around money. we are moving beyond that in the core of our value proposition. it is transforming toward serving much better decision-making not only on the investment side, there is a lot people decideng whether they should be spending are saving in their day-to-day. in a way that is actionable. automating the activities that
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are associated with auditing. we have great tools of forecasting cash flow, predicting movements in your bank account. francine: how much money are you spending to develop artificial intelligence and machine learning? say what is hard to money goes to one specific category. this is a more agile way of working and focusing our efforts on whatever has most impact. we are turning the organization to a data driven organization. to learn theing new tools. francine: are you expecting consolidation in the banking industry in spain? guest: it has consolidated quite a bit through the crisis.
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them and two of [indiscernible] we are consolidated already. that is not the focus of what we are doing. it is organic growth and transporting -- transforming our value proposition. francine: there was quite a lot of spanish politics in the news. ?id that lead to a discount guest: it did weigh on uncertainty. the sale of -- the rule of law has prevailed. which is important as the basis of democracy. what we can learn is that the state has the mechanisms to make that rule of law prevail. that is tremendously important. francine: thank you for joining us. that was the chief execute of officer of bbva. we will continue to focus on banking and u.k. banking with
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the barclays ceo jes staley. to come andom davos the ecb meeting. we will take that live. the spanish banks can be affected by what is going on in brazil. the brazilian markets are expected to have a very strong day. look for some reflection of that and the european trade in 18 minutes time. we will be speaking to the barclays ceo jes staley later on. the market open is 18 minutes away. this is bloomberg. ♪
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7:44 a.m. in london, 8:44 a.m. in the mountains of davos. the prime speaking to minister theresa may at the world economic forum. investors are already bracing for more bad news from european payouts ands, capital levels are likely to dominate the narrative. tole regional themes look compound the negative sentiment, barclays, rbs, and loans are on the hook tied to the failed
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construction company carillion. t this.et a look a francine: thank you and good morning. we are pleased to beat joined by jes staley. president trump is showing up, we heard from mac run, we're speaking to theresa may. what do you make of the first 12 months of president trump in charge, better worse than expected? britishm the ceo of a bank so i will leave american politics to the side. changesieve that recent in terms of approach with regard to regulation, obviously the tax bill is very significant. i think the new administration has created a new dynamic in terms of how countries around the world am a whether it is europe or the u.k., deal with
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corporations as a regulatory matter and attacks matter. a lot of change has been brought by this new administration and it will be interesting to see theother countries around world and how europe and the u.k. in particular for us respond to what has happened in the u.s. francine: do you believe you cave regulars are looking at the u.s. waiting to see what they are doing and ready to relax the rules? brexit is happening. post the financial crisis there was a consensus around the major economies of the world that we needed to reregulate the financial markets and do it in a way that we mean terror -- maintain parity. no institution could ever tries one regulator against the other. done and a lotas of important regulation was brought into the financial system over the last 10 years. we consistently or i have consistently supported a more
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regulatory environment but now there is a new equation. it does seem as though the u.s. frontling to be on the foot in terms of making the u.s. market competitive. barclays business strategy is a transatlantic bank so 40% of our revenues are generated in the u.s. and the u.s. has become one the lowest tax jurisdictions we operate in. that is a substantial new phenomenon that we have to recognize. eric: the big u.s. banks were already the most profitable and best capitalize before tax reform and before what may happen in the way of deregulation. as you the mentioned, our cleats some benefit out of that but 60% of your business does not. how do european and u.k. banks compete with american banks that now have the ability to price so much more aggressively? we are a major u.s. bank in
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our own right but we are a british bank and we are dedicated to the u.k. and to great britain. we have to remain competitive. we have a very open discussion. this is very new. what is coming out of the u.s. .s new for all of us we think the united kingdom has brought tremendous assets. we like what barkley does, we are a british bank. we will be. we think the united kingdom has brought fine. it helps us relative to european competitors, the scale of our business in the u.s.. : does it make you want to shift -- given the fact that the dynamics and the american market are some of more appealing, do you want to do business relative to what you are doing? -- can question mark you? jes: we had this strategy we set out in 2016 and we will stick to that. our roots are in the u.k.. we have a tremendous business in great and europe.
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we want to stay a global institution. let's see regulators respond to this new phenomenon. francine: have you started moving the 150 jobs to dublin? jes: we're making investments to be prepared to use our irish subsidiary to re-domicile our european branches as branches of that bank. noare repaired so that matter what happens with brexit, we will be able to continue to prosecute our business a crop -- across europe. francine: what is the one question that you would like theresa may to answer? is fore important thing the premised are to stay focused on the u.k. and what is right for the people of the u.k. so i would not dare it -- it dare ask a question for barclays. she has a big challenge and she
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has shown rate capacity to deal with a lot of the issues. this could be an interesting moment given what we are seeing toterms of the u.s. approach globalization. that could be an incentive to push the u.k. and europe that closer together. if you look at the comments that came out of macron, there is ample field for the u.k. and the european union to re-embrace the values of free trade and the values of globalization. in a backhanded way, this has brought u.k. and europe closer and the premised are recognizes that. are three weeks into one of the biggest changes in the environment. how disruptive has it been? jes: we have a great team around
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operations and technology at berkeley's. we have set up the [indiscernible] which was one of the biggest technology lifts in finance. when iwhen i think -- method bes the scale player. if you're scaled the way that barclays is, one of the largest dealers of securities in europe will beu.k., mifid positive for barclays. i am not sure that concentration in the capital markets is healthy in the wrong one but mifid 2 has been positive. erik: your clients are the one who decide how much to pay for research, they are the ones who decide how much to pay for corporate assess. -- axis. how is that going? 2 needsare where mifid
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us to be. if you are an asset danger and i need to have counterparties that are complying and i can drive the volume through, that is good for barclays. i am not sure cutting up the smaller players is healthy for the capital market. is the doj investigation progressing, how do you expect it to and and how much will it help with share price? jes: we continue to have conversations with the department of justice. we want a settlement. we have said for us what has been important is we want to be treated proportionately fairly with how the u.s. banks settled. we hope we get to a point where there is a settlement in both parties can look back and say the penalty paid by our cleese is correspondent with what
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happened in line with what happened with the u.s. banks. last 10 months i have been given the great opportunity to be ceo and to exercise my role of running barclays. i am not allowed to talk about the investigation. let's hope we come to an end soon that i'm still focused on the running of barclays. was aixed income challenging business. was barclays business consistent with -- with what you're u.s. competitors reported. what is it going to be like this year? jes: i cannot comment on what the fourth quarter was. erik: qualitatively. jes: i feel good about the bank overall. to our corporate and investment bank. ourike the diversity of business model.
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venues, in other think we are going to see renewed volatility in the financial markets and i would anticipate that happens in 2018. that will be positive for our trading business. we will be in good shape. .e paid for performance our revenues were roughly flat over the year. profitabilityve to our shareholders so we are focused on that as well. e bonus seasonthe passes. ri -- how the bonus season passes. there is this potential for volatility whether that comes from interest rates and central-bank moves, do you find that the market for talent is getting more competitive again? jes: not really.
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a lot of the talent moved to the alternative space. the alternative space has not have its moment challenged for the last couple of years that what i do not want barclays to get into is a race for talent around compensation. that would be terrible for the culture of the banks. we would -- want people to work at barclays because they want to be with the bank and focus on the businesses we do and i do not want to get into competition for a trade. francine: thank you for joining us this morning. that was jes staley, the barclays ceo. guy: thank you. great interview, interesting stuff coming out of that one. we are four minutes away from the start of trading in europe. anything with the brazilian association could be interesting. you could see stocks like santander doing well.
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the brazilian markets will floor appealback of the lula or the lack of it. we will talk about that story plus what else is happening in europe. the dollar be -- remains a big theme ahead of the ecb. this is bloomberg. ♪
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guy: one minute to go until the start of cash trading here in europe. let's talk about what the markets are talking about for the dollar, front and center. 124.20 as werading headed to the ecb later on. is there anything mario draghi they later to slow the assent of the single currency? euro-dollar volatility, it spiked a little bit. rise,n continues to affecting the equity markets in japan. the asian session continues to focus on the dollar story. back above 70.86. with the dow, but the nasdaq and the s&p did not have quite such strong data.
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keep an eye on the brazilian story today. could affect santander and vw. plenty to think about. who could be talking to diageo shortly on its numbers. wei points to a flattish open. here is a market open. the numbers we need to be focusing on, ftse 100 comes out of the gate in negative territory. the pound 143 yesterday. ex-divvy going today. the story will be in the individual names. we are getting a euro effect into this story. there is a dollar effect into this story. flat,c out of the gate, at the start of the trade this morning. about what is happening over here. this is the sector story.
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what have we got on the imap? financials trading lower. consumer staples with bright patches of red. bright patches of green. materials reasonably well bid. energy better bid this morning. thefinancials are where laggard is coming through. health care trading a little bit softer as well. matt, what are we seeing in the individual names? are seeing more losers than winners. we saw this yesterday, by the way. stocks down. 120 gainers in the stoxx 600. today, a similar ratio. 164 to 354 in the upper left-hand corner. herer as the actual movers that we are seeing pushed the index around, we have got banks on the downside. nordion and hsbc at the top, weighing on the index.
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a lot of german stocks in here. s.a.p. down. siemens down. german stocks, again, as yesterday, weighing on the stoxx thanith the dow down more 1.6%. diageo right up here at the top. later, talk to diageo adding the most points to the stoxx 600 of any stock trading. you see a big dinner today. billiton and anglo american rising as well as glencore. you see some of the mining stocks rising. not the energy stocks adding to the stoxx 600 this morning. we are waiting for the big event later on this afternoon. mario draghi faces a currency problem in his first address from the ecb of 2018. along with the rapidly approaching euro, the bank will have to factor in america's overtly protectionist trade policy.
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and steve mnuchin's comments about the dollar. some have been expecting a quicker exit from quantitative easing to be announced, but the most pressing question is will draghi talk down the euro? frankfurt, paul gordon. paul, draghi cannot really today, andeuro especially, i wonder what he has to say about mnuchin's comments. i'm sure he will be asked in the queue and a period. it seems the u.s. treasury secretary was pretty overt. yes, that's right. this is one of the key issues for the ecb at the moment. the euro dollar exchange rate is now the highest since late 2014. --t may be ok around the 124 125 level, but it is the pace of n which concerned some policymakers. it may reappear in the governing council statement at the start of his press conference.
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any comments on uncertainty surrounding the impact of the inflation? if he manages to get to all of that, it will be a maccallum from as well. -- the conference as well. cannot ignore it. guy: the markets are on tenterhooks, waiting to see exactly what he has to say, paul. what could he say in terms of timing that may affect market sentiment and maybe pushes things out and take the pressure off the single currency? paul: the question here is if they do say that the euro is potentially a source of uncertainty and something they are monitoring closely, that may take some of the edge off the euro, because it is a sense that it could be either action or nonaction. what people are looking for is signs that one purchases are going to be wound down this year. the longer that is pushed out, the longer it is until you get the first interest-rate increase sometime in 2019, and the longer you get easy monetary policy.
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to the language, which is all you can expect at this moment, is what people are looking out for. matt: is the market expecting, paul, draghi to be able to raise rates before his term ends in 2019? [laughter] paul: you have got to think he hopes he can otherwise he will be the first ec president never to have done so. it is getting tight. he is want to run bond purchases until at least september. he is not going to raise rates until well past that period. most economists and investors are looking sometime in early to mid-2019 for the rate hike, but that may only be the deposit rate. refinancing rates could wait until the next ecb president, potentially.
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guy: interesting times. thank you very much indeed. it will be a fascinating event. paul gordon, central banks editor joining us there. the team will be on it later on. there is a tliv on your bloomberg which you can follow. we will be taking the decision out of frankfurt and the press conference out of frankfurt on bloomberg. coming up on this program, we are going to speak to the man in charge of steering the u.k. economy as we head towards the e.u. exit door. philip hammond is next. this is bloomberg. ♪
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guy: approaching8:09 in london, 9:09 in davos, switzerland. we saw the cable rates, the pound versus the u.s. dollar popping through, 143. later today, we will be speaking exclusively to theresa may, live from the world economic forum. let's stay with the u.k. theme right now. treasury secretary steve mnuchin says the u.s. is ready to negotiate a trade deal when the u.k. is ready. however, despite years of austerity, the country is dealing with public finances that are firmly in the red. that is before getting to grips with the thorny issue of brexit. let's find out more. let's get back to francine lacqua. thank you very much. i'm pleased to be joined by philip hammond, chancellor of
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the exchequer. we were listening to some of the headlines coming out of the trump administration, saying exports are holding up in the u.k., especially manufacturing. mr. mnuchin saying they are ready to negotiated trade deal when the u.k. is ready. when will the u.k. be ready? philip: we are in a process of negotiation with the european union. and we will not be free to commence trade deals with countries until after the transition period that we are negotiating right now at the european union which will probably be two years after we lead in march 2019. is not mean we can't are negotiating the deal, putting them in place to be effective what the transition is over. davos,e: yesterday and mr. magician saying a weak u.s. dollar is good for the u.s. economy. are you worried we are seeing currency wars research? urge?se
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philip: i hope not. it may make americans feel the system is ever to them and ease some of the pressure around the trade system. i think that is a good thing from us. pound has beenrou appreciating. willoughby pound help weakercant -- will a pound help? philip: it raises the cost of our imports. s we havee challenge had over the last year or so that a weaker pound has led to higher inflation and stagnant real wages. that is driving some of the challenges we face at home, so getting that inflation rate down , arising pound will help to do that, and it helps to drive increases in real wages, and
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that is good for our economy. francine: is there a sweet spot where the pound is? days,: over the last few we have seen the pound appreciate against the dollar quite rapidly, but it is pretty stable against the euro, so we are very happy with where the currency is at the moment. francine: today is the sweet spot. philip: i think so. francine: chancellor, when you look at the cabinet in the u.k., is there a consensus amongst the cabinet what kind of relationship the u.k. wants with the e.u.? possible --closest greatest possible level of markets so all the supply chain, all the business relationship that we have built up over 40 years can continue, but we also want to build our trade links with the rest of the world, recognizing that the fastest economic growth is coming in areas beyond europe. francine: should the u.k. stay in the customs union?
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philip: we will not be able to stay in the e.u. customs union because we want the members of the european union, but making sure that goods can flow with low friction off the cross of the border between the u.k. and the e.u. is very important to both sides, so i am sure we will want to form a close customs agreement with the european union to make sure that happens. francine: but if the u.k.'s position is to stay in the customs union, it would solve the ireland question. philip: there are many other ways that we can do that. withine: chancellor, passporting out of the equation, what kind of financial services agreement are you hoping for? philip: financial services have to be part of our relationship with the european union because there is such a large and important part of our economy, and we can operate without ofsporting through some sort equivalent regime. it has to be a regime that is robust and objectively determined. it cannot be something that is dependent on the whim of the european commission. it has got to be more robust than that.
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philip: what would it exactly look like? equivalence is fine so long as equivalent is objectively assessed, not politically determined. francine: the framework for that is what? philip: we have to negotiate that with the european union. the u.k.'s financial services sector is larger than the rest of the european union put together, so we have some in proceeding weight in this discussion, and i hope we will be able to come to a sensible solution that recognizes the challenges, has an architecture of regulatory and supervisory corporation, which makes both sides feel comfortable, and allows european union real economy companies to gain the benefit. francine: chancellor, do you expect the details of the future relationship between the u.k. and the e.u. to be laid out clearly and in full by the time parliament votes on the withdrawal deal? philip: probably not the full
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details, but we would expect the high-level shape of the future relationship to be emerging by that time. francine: talk to me about the coin. will it be regulated? are you interested in bitcoin regulation? philip: i am interested. the bank of england has been looking at bitcoin. it is a very interesting, new development. cautiouse should be about bitcoin. and possibly, we do need to look at the way we regulate this bitcoinent before becomes large enough to be systemically important in the global economy. it is not there yet, but it could get there soon. what is really important is that in regulating cryptocurrencies, we do not inadvertently constrain the potential of the technology that underlies it, the blockchain technology, which has a wider and more important application.
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francine: so does it need to be done at the g20 level? philip: it needs to be done at the international level, and it will be on the agenda for the g20 meetings in argentina. chancellor, when we go back to the things we heard from president trump earlier this week, it was about tariffs on washing machines, solar panels. you think this will hurt the u.k. on exports to the u.s.? philip: we are always concerned when we hear any of our important trading partners talking about restricting trade, imposing tariffs. we are a medium-sized but very open economy. we are very clear that we benefit from an open trading system. so we always try to encourage trading partners to keep the system as open as possible, but we recognize the concerns that there are in the u.s. system about the fairness of trade, and as i said earlier, hopefully, u.s.epreciation of the dollar and the opportunities that creates will help to create a sense of a more level playing field without necessarily having to reach the tariff solutions.
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francine: thank you so much for joining us is morning on bloomberg tv. that was philip hammond. i'm going to hand it back to you. modern great interviews. we will be speaking to the irish prime minister in a short hour or so. guy: looking forward to that conversation on the other side of the border. francine lacqua speaking to philip hammond. we have a very nice interview coming up with theresa may, the british prime minister. she will be joining us a little bit later on in the morning. that conversation is one that you certainly do not want to miss. this is bloomberg. ♪
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guy: 20 minutes into the market session, let's take a look at the map. let's show you what is happening on the bloomberg this morning. as you can see, most of europe from an equity point of view, the level not going anywhere this morning. we are drifting sideways. it was a negative session yesterday, driven by what was happening to the dollar. that is affected by markets like the ftse 100. a sector level, a stock level, certainly more action coming through. oil continues to be a big feature. brent north of $70 per barrel. pushing on in the data and the dollar map.
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matt: saudi aramco's ceo says the most important tax paid by state-owned energy diet will fluctuate -- giant will fluctuate with the price of oil, clearly. francine lacqua in davos. -- saying the decision is still being made. as a company, we are ready to be listed into the second half of 2018. team thatansaction will carry that is currently waiting for the decision from a shareholder, which is a governmental -- the second listing. the venues that will be listed, and because there is certain work that needs to be done in preparation for the stock exchange, and definitely in saudi arabia. as a company, we are ready. we are hopefully -- we will be
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the second half of 2018, but it is all depending on the decision on the second venue. francine: and do you think that the government is nearing an agreement? a kind of things are they looking at to make a decision. amin: we have appreciate this is a big decision. where we list saudi aramco -- saudi aramco is a major contributor to the gdp of saudi arabia. it is not like listing in the company. so a lot of information was passed to the committees, the arernment committees that looking at listing saudi aramco. stefan and stock exchange. decisions in each need to be evaluated. ultimately, they need to come up with a decision, pros and cons with each venue. saudiof work considering aramco and what it means for saudi arabia. francine: is this a choice
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between two listings internationally or is this a choice between listing internationally or only domestically? amin: definitely we will list internationally. that is -- francine: domestically, yes. amin: internationally, we want to list internationally. that is where the consideration is happening. work in the of different stock exchanges in london and new york and tokyo and hong kong stock exchanges, and each one has its advantages and pros and cons, and in terms -- a lot of information passed to the committee that is looking at all of that information. and the decision hopefully will come in due course. francine: is there a risk that this is not a global listing? this was sold as an international listing. why the reticence? amin: still nothing about listing only in the kingdom or going back on saying "no, we're not going to --"
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evaluating thes option of listing in the kingdom and internationally. francine: what do you think the committee is looking at? is it regulation? is it advantages? are they negotiating the stock exchanges? amin: it is a lot of the work which is done by us and our consultant in terms of the different stock exchange information. you need to appreciate the .nformation the government committee is looking at all of that information. it is a lot of information. and a lot of views. and all of that needs to be looked at. the decision will come in due course. asser, whenr. n you look at the different listings and the pros and cons, will it be less attractive for foreign investors investing in saudi aramco? amin: a lot of things will happen when we do the show.
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-- a lot ofco investors will be interested in aramco regardless of the decision. a lot of information that will withared, and this is -- all of that information, we will be confident. there is a performance in the environmental performance of the company in the safety and the technology, so we are not concerned about the impact on we areramco because confident that the company performance and all of that will attract a lot of attention. guy: that was the saudi aramco ceo speaking to francine lacqua and davos about the companies upcoming ipo plans and where that ipo will ultimately take the business both locally -- that looks like a certainty -- plus internationally. a couple of swiss stocks i want
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to mention on the move this morning on miami are our screen -- our mrr screen. baked goods abandoning guidance. the other one at the bottom is what is happening with clarionce, trading down. the activist has been trying to avoid the story and now sells that. a number of thoughts on the move on the downside. getting clipped off the bottom. it is getting down pretty sharply at the bottom of the screen. up next, hard times. we are going to speak to diageo's ceo following the companies release of first-half numbers which look pretty good. there is a big translation affected all of this. yasiel is trading up. it was up around 2%, but since then, the rally has faded in the stock. they are trying to mess with whiskey. flavored whiskeys? is this the way forward? they are trying to change the way on scotch.
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plus also, we are going to talk about what is happening with petrone as wel. as well.e ♪
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guy: -- matt: we are 30 minutes into the trading day. let's get your top headlines off the bloomberg. how dovish of draghi had be to slow the euro's rise? the ecb decision is at 1:45 p.m. -- 1:45 p.m. in frankfurt. we will take it live. loses. brazil's presidential front-runner looks unlikely to be on the ballot paper in appeal court an upholds his corruption conviction. trading suggests markets will have a strong they indeed. we are seeing that show through in european markets as well. dollar pain. diageo says fx pressures will by 460ll-year sales
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million pounds. we will speak to the companies ceo in just a few minutes. wait for that. we will talk all about the beer and spirits business. some of the pictures may make you very thirsty. it is 9:30 in berlin. miller alongside guy johnson at bloomberg's new european headquarters in london. guy. guy: is a 30 minutes into the trading day, european equities at a headline level going nowhere in a hurry. yesterday was a big down day. stoxx 600 down by .1%. things can change throughout the day. the ecb meeting and what is happening in davos represent risks to that story. in terms of the sector breakdown, telecoms our bid. the minors are trading back up again this morning, up by .2%. these are not big moves. the market feels a little
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cautious. ahead ofrading just the market. on the downside, where are we going to see some of the performance today? the media's trading down. industrial goods and service, chemicals, the clarion story, and health care. the main events, maybe macro today. bloomberg first word news update. here is sebastian salek. heastian: donald trump said would "love to talk under oath to special counsel robert investigatings whether anyone close to him colluded with russia during the 2016 campaign. trump's lawyers have been talking about an interview. they met last month and have been speaking by phone as part of a continuing exchange over logistics that could take several weeks. donald trump warns turkey against expanding its military offensive against u.s. bets kurdish fighters in northern syria as he told president erdogan that such action could lead to direct conference with u.s. forces. trump urged turkey "the de-escalate limited military
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."tion and avoid civilian casualties in china, the strongest signals that the governor may be about to retire as the news agency reported he is being reselected -- is not being reselected as a member of 13th nationalt committee. he is likely to retire from the central bank before march when the conference use the world's annual meeting. brazilian appeals court is unanimously upholding the sentence against former president lula da silva. to increase his prison sentence from them .5 years to over 12 years. that kills his chances in october's presidential election which ha he had been leading in. eal was up by almost 2%.
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this is bloomberg. guy, matt. guy: thank you very much indeed. diageo, the world's largest distiller, has reported organic sales growth will ahead of consensus estimates, but net sales were hit by the weakness of the dollar. with half asays fx billion pounds. joining us, the ceo. we have seen the mover -- the dollar move aggressively. if this gets even more pronounced, how big a problem is it going to be for a company like the are geo-? -- like diageo? >> we grew the top line 4%, profits 9%, really strong. the thing about diageo is we are a global company. we are enjoyed in 180 countries. foreign exchange was a run all
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the time. when i look at is the underlying performance of the business, and that is broadbase, consistent, and improving. the cash flow is very strong. so we believe the company is whereositioned for the w the world is going. consumers are drinking that are, and our brands do well in that environment. we are very efficient company. productivity program is driving wealth, and we are be investing those savings in marketing, in innovation, in our capacity like in scotland, and in our bourbon investment and beer investment in africa, so i am feeling good about the business, and the consistency of the you delivery is coming through strongly. matt: i want to ask ivan about bourbon. as an american, i have a strong affinity for the spirit. website on theur squad's whiskey page, it is like a never-ending stream of really high-end, very delicious but
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expensive scotch whiskeys. when i look at other whiskeys, i don't see a lot there. do you want to expand into that area? brands inave got some american whiskey. crown royal, which is our biggest brand in america, doing really well, and then we have got this amazing jewel now, which is galloping, called bullet bourbon. i hope you tried bullet. matt: absolutely. we also have other bourbon. we have this amazing high-end series called orphan barrel which sells for 150 dollars, $200 per bottle. whiskey is having a renaissance. we have a great position in both scotch whiskey and american whiskey. to a country to the concert the other night here in
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berlin, germany, and the gentleman who was playing off it had brought a bottle of bullet bourbon with him just in case he could not find any over here. let me ask though about another spirit that has become incredibly popular, the tequila, as evidenced by the $5 billion purchase of jean-paul does oreos petrone. the portfolio is fairly thin as well. think about the growth of the tequila market, and how can diageo profit from that? the tequilap end of market is really strong and growing rapidly. particularly in the united states. also in mexico, and it is spreading around the world. i am delighted with our position. we have two fabulous brands in don julio. we have in the results announced, our tequila business grew 43%, and this is expensive tequila, right? bottles that are $50 per bottle.
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we are well-positioned. don't you is really on a very strong -- has strong momentum, growing market share, the high-end of the tequila market. in the period we have covered, it was up 70% in the united states. a very positive trend, a very profitable sector. have a brands we think lot of runway for exciting growth over the years ahead. guy: i think just for full disclosure, i should point out that matt and i are doing dry january, so from a disclosure point of view, we need to mention this. let's talk a little bit about flavored whiskey. you want to change the rules a little bit. there is talk of changing the rules around whiskey. can you talk us through what is on the table here and what effect it could have? we have seen jin change
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grammatically around rule changes. company,are whiskey because with the company where we leader in such whiskey -- are the leader in such whiskey. we are committed to building this category with the craftsmanship and tradition involved because whiskey, and say modern for the new generation, so we would never compromise on the integrity and quality of scotch whiskey. if you're drinking johnny walker another 100 years from now, it's going to be exactly the same product. guy: ivan, on that reassuring note, thank you so much for joining us this morning. guy:the ceo of diageo. stock price doing reasonably well this morning on the back of it. now, let's move on and talk about something else that's happening in the world right now, following china's $43
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billion acquisition. let's focus on the pesticides sector. eric is in dallas. over to you. eric: thank you very much. a company,eo of which has successfully merged. good to see you. here is where i would like to begin. the issue that concerns you most at the economic forum is of all things, change. why is that? contributesulture 30% of the greenhouse gas emissions and uses 70% of the world's freshwater. address climate change without addressing better than we have the agriculture and food value chain. eric: what is syngenta doing about it? guest: we work with farmers around the world. we have trained 20 million farmers to use agriculture techniques that increase yields but reduce greenhouse gas emissions and reduce the water consumption needs. eric: what i am getting at here
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is perhaps maybe i did not phrase the question well enough. why is it so important to syngenta? you are a seed, pesticides, herbicides, fungicides company. the connection is not necessarily obvious. you could sell all of those products to your constituents, your customers, without, you know, giving a character climate change. erik: climate change is a hugely important issue for the world, and if climate change gets out of hand, farming will be badly damaged. eric: you see this as an accidental problem? -- existential problem? erik: absolutely. eric: before preface the question -- do you find the other leaders here, the world economic forum, whether they be ceo's, whether they be political leaders, united in their concern for climate change? erik: yes, i think there is a very strong, united feeling about the importance of climate change. there's different feelings about
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how to address it, and certainly, it is very complicated, very emotional, so there is not a united approach yet to how to address the agn foodchain, but there is a united foodchain, but there is a united sense that it is hugely important for the world. the: given your passion for issue, what do you say to the fact that there is a president of the united states who has dismissed concerns over climate change and in fact brought in policies that do not require the approval of congress that are, if anything, you know, in opposition to the concerns over climate change? erik: the way i would put it is i believe the united states is still very committed to solving the climate issue. i would talk about ceo's, government people, academics -- eric: just not the trump administration. [laughter] erik: well, some of the words are not totally consistent, but i can tell you that the actions
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the united states are taking is in line with addressing the climate issue. in the farming -- in the farming community in the united states, the united states farmers adopt leading technology first, things like no kill agriculture that reduce the greenhouse gas emissions. from an agriculture standpoint, the united states is taking significant steps to address climate change, and syngenta is helping. eric: what do you say to your fellow ceo's who continue to lobby for a looser regulations on coal production, oil drilling, powerplant emissions? erik: i think that there needs commitment to addressing the climate issue and that the united states needs to play a critically important role to that. eric: when we saw each other last, it was at the st. petersburg forum in may. he told me you were on the hunt for a seat acquisition. you found one. [laughter]
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erik: yes. eric: in brazil. erik: yes. eric: in the case of most companies, there is usually digestion involved. tell me about your m&a ambitions going forward. erik: the company we are buying will close in a few weeks. it is a corn and soybean player in brazil and argentina, which is a critically important part of the world for agriculture. we are very much looking forward to having them part of this syngenta family, and we are looking for additional acquisition opportunities in the seeds business around the world. seeds,hy seeds, just given the fact that you are active in so many different parts of the agriculture products and services chain? it the other areas, we have very strong positions. in seeds, we are number three, and we want to strengthen the opposition. eric: you want to be number one? erik: sure. eric: how much do you figure it
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would cost you in the way of m&a to achieve the number one goal? erik: we now have chinese ownership, and one of the benefits of chinese ownership is they take the long view. [laughter] erik: so we obviously want to perform very well in 2018, but we want to do that in a way that gives us for 2019, but for five years, 10 years, 20 years down the road, so we have a combination of investing in the base business or investing more now in research than we did before we were acquired by chemchina, and making acquisitions in the so it is going to take a lot of capital over time, but it is going to be a good step, and we have cash flow, good earnings to pay for it ourselves. eric: eric, it is great seeing you. erik: great seeing you. davos,rik fyrwald in switzerland. guy: thank you very much indeed.
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later, we will be speaking exclusively to the british prime minister, theresa may. that is coming up. this is bloomberg. ♪
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matt: all right. it is 8:49 in the city of london. 9:49 here in berlin. i want to quickly talk about to you what is going on with the euro because we have seen it come down now ahead of the ecb meeting. because steveng, mnuchin, the u.s. treasury secretary, made comments earlier to the extent that he was happy with the weaker dollar, at least in its affect on the u.s. economy. and at the time, we saw the euro saor up against the greenback. we saw the yen jump up against the dollar. istoo strong a word. -- is too strong a word. they be some traders expect
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mario draghi to make some comments when he speaks at 1:45 central european time here in frankfurt. well, the statement comes out at 1:45. the speech into enabled yet 2:30. later today, we will be speaking exclusively to the u.k. prime minister, theresa may, from the economic forum in davos. speaking of, i want to go back to this with the city and talk about the future of italy's banking sector. the head of state lender says needitalian banks will government aid to be capitalized, but the 20 billion euros that was set aside by italian decree should be sufficient to do so. let's go back to davos. has an exclusive interview for us. francine. francine: the ski resort has been transformed into a little , economicolitical circuits. a record number of heads of state. let's get back to it and talk a little bit about the banking sector but also the possible
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disruption coming from elections. we are very pleased to be joined by the chairman of gdp. thank you for sticking to bloomberg. when you look at march 4, the outlook for the italian election could actually prove difficult to form a government. it's unclear exactly what the polls suggest. the polls in the past have been wrong. do you worry that this election could be disruptive to reforms? whatsten, nobody knows going to happen, so let's start with that. i am positive, and i'm optimistic, and the reason why i'm positive and optimistic in terms of continuing the reforms have, of course, is because the current polls have something like 45% of abstention rate, which is huge. those voters who at the moment say they are not going to vote are potentially moderate voters, so if the moderate parties to bring this campaign
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a portion of those voters to the polls, i think they are going to moderate voters, and therefore, the chances of getting a coalition between the centrist parties, center left and center-right, become much higher, and in that sense, the reform path will continue. francine: a kind of new reforms do we need to deal with youth unemployment? claudio: i think we need to simplify the investment process, and therefore, a lot of reforms that go towards simplifying the bureaucracy are essential. the other major reform that has to be done in italy is justice. something has already been done, but too little at the moment. theird the radical reform to really give certainty of the right. i think we can get that. francine: that requires work on the government? does it have to come from the people? does it have to come from
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businessmen putting pressure on whatever government is to push through that way? claudio: i think it is already pretty clear in the minds of the current maturity and the current government -- majority and the current government. if there is going to be presence of the democratic party is essential, and i think people on the center-right on the moderate side will also go along. francine: talk to me a little bit about the banking system. we have talked about the banking system when you were in london last time, but there are a lot of proposals from the e.u. asking a little bit more of levels of provisioning being higher. this drew a lot of criticism from the italian banking landscape. is it justified? claudio: the italian banks are saying they have done a lot in that respect. we know that the old system was starting from a higher level than other countries because the recession in italy has been much stronger than in other countries in europe. and therefore, the level by definition has increased. now, the economy is doing much better, and of course, when the
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economy is better, we have a different trend. and you know, they don't want to be sort of pushed around by doing something more than what they are already doing. i think that the old banking system is in much better shape than it was two months ago, mainly for two reasons. one, the credit, which was a massive rights issue. and secondly, the intervention of the state, monte dei paschi, which has allowed them to take over the venetian banks. those were really the major issues. all the other banks are pretty much in decent shape. new you ruleshese take shape and are implemented, will lending be hurt? is this something we need to be careful about? claudio: i don't think so, because i think the measure that will be taken by the banks as a response to the ecb would be to
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be more aggressive in selling down npl's, which eventually would free up capital. levelne: is there a playing field with italian banks compared to the rest? does there need to be more consolidation? are there too many banks? claudio: there are too many banks, but there are also a lot of small banks which are not really relevant. they are very local. italy is a very fragmented country. historically. and therefore, local banks are always going to be there. now, there are clearly still, you know, three or four ba major transactions that might happen in terms consolidation, but as of now, i do not see anyone of those happening in the next three months to six months, but eventually, yes. francine: do you see them taking a role in the restructuring of alitalia? claudio: at the moment, no. i think there is a process going on. i think the good news is that
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there is, you know, very strong , fromst from lufthansa air france, from easyjet. so there is going to be some competition. now, if one of those, you know, potential buyers will, you know, ask to have some support, we are ready to talk to anybody, but for the time being, we are not part of the process. francine: what is it like at davos today? it seems like everyone is waiting for the president. claudio: everyone is incredibly optimistic. bullish. francine: too optimistic? claudio: i am also bullish, but when i see too much optimism, i get scared. [laughter] francine: thank you so much. claudio costamagna. i am am going to hand it back to you in london. guy: francine, thank you very much indeed. a great day and prospect in dallas. we will be looking for to all of this. of next, "surveillance" takes to the airwaves. francine lacqua joined by tom keene, later on from davos.
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they will be having incredible conversations. matt and i are off to bloomberg radio. this is bloomberg. ♪
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♪ francine: draghi versus the euro. will the central banks first decision of 2018 at 1:45 p.m. in frankfurt. the dollar continues its slide following steve mnuchin's remarks that a weaker currency is good for trade. president trump has two doubles -- to davos.

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